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Between 2006 and 2020, the world is expected to reach a peak in oil production where world demand for oil resources will be greater than the world's available oil supplies. Learn about oil and natural gas depletion and what that means for the global economy and our way of life in the United States.

Monday, January 30, 2006

Energy Crisis for Humanity?

Fossil fuels have been the cheapest and most convenient so far.It is perhaps too early to talk of an energy “crisis“. But take your pick from terms like “serious concern“ and “major issue“ and you will not be far from the positions which analysts are increasingly adopting. The reason for their concern can be found in a set of factors which are pulling in glaringly different directions:

* Demand for energy, in all its forms, is rising* Supplies of key fuels--notably oil and gas--show signs of decline* Mainstream climate science suggests that reducing greenhouse gas emissions within two decades would be a prudent thing to do* Meanwhile the Earth’s population continues to rise, with the majority of its six billion people hankering after a richer lifestyle--which means a greater consumption of energy.

Underlying the growing concern is the relentless pursuit of economic growth, which historically has been tied to energy consumption as closely as a horse is tethered to its cart. It is a vehicle which cannot continue to speed up indefinitely; it must at some point hit a barrier, of finite supply, unfeasibly high prices or abrupt climate change. The immediate question is whether the crash comes soon, or whether humanity has time to plan a comfortable way out. Even if it can, the planning is not necessarily going to be easy, or result in cheap solutions. Every energy source has its downside; there is no free lunch, wherever you look on the menu, bbc.co.uk reported.

Runaway HorseThe International Energy Agency (IEA) predicts a rise in global energy demand of 50-60% by 2030. If all else remained equal, that rising demand would be accommodated principally by fossil fuels, which have generally been the cheapest and most convenient available. But oil supplies show signs of running down; this, combined with concerns about rising demand and political instability, conspired to force prices up from $40 a barrel at the beginning of 2005 to $60 at its close. There is more oil out there, for sure; but the size of proven reserves is uncertain, with oil-producing countries and companies prone to exaggerate the size of their stocks. Currently uneconomic sources such as tar sands could be exploited; but at what cost?

Natural gas stocks--in recent times the fuel of choice for electricity generation are also showing signs of depletion, and there is growing concern in Western capitals about the political instability associated with oil and gas supplies from the Middle East and Russia. Coal, the fuel of the industrial revolution, remains relatively abundant; but here the climate issue raises its provocative head most volubly, because of all fuels, coal produces more greenhouse gas emissions for the energy it gives. Based partly on the predicted availability of cheap coal, the IEA forecasts a 50% rise in greenhouse gas emissions by 2030. Mainstream climate science, meanwhile, indicates that to avoid dangerous consequences of climate change, emissions should fall, not rise, by 50%. The economic and environmental horses are clearly pulling in mutually incompatible directions.

No Climate CurbsIt is a rare human that dons a hair shirt voluntarily; and in seeking to deal with climate change, we are, it seems, behaving to type. It took the world’s most comfortably-off nations more than seven years to bring the Kyoto Protocol into force following its signing in 1997. An alternative “climate pact“, the Asia-Pacific Partnership on Clean Development and Climate, emerged last year contending that technology alone would solve global warming. It recently concluded its first ministerial meeting by endorsing projections that under its aegis, emissions will at least double by 2050; economic growth is sacrosanct, and so consumption of coal and other fossil fuels must also continue to rise. Concern over climate change, then, is not on a global basis proving to be a driver for clean technology or for reducing demand for energy.

Price BarriersRising prices or simply constraints on supplies of fossil fuels could, however, bring other fuels into the equation; and nuclear fission is at the head of the queue. According to the World Nuclear Association, there are now about 440 commercial reactors in the world, providing 16% of its electricity; for major developing countries such as India and China, nuclear power remains both a significant part of the electricity mix and a close companion to military programs. But concerns over waste have set other countries such as Germany on a determinedly non-nuclear path. Waste apart, nuclear faces another potential obstacle; stocks of uranium are finite.

Sunday, January 29, 2006

Ready For $262/Barrel Oil?

..Hermitage Capital's Bill Browder, has outlined six scenarios that could take oil up to a downright terrifying $262 a barrel.

To come up with some likely scenarios in the event of an international crisis, his team performed what's known as a regression analysis, extrapolating the numbers from past oil shocks and then using them to calculate what might happen when the supply from an oil-producing country was cut off in six different situations. The fall of the House of Saud seems the most far-fetched of the six possibilities, and it's the one that generates that $262 a barrel.

More realistic -- and therefore more chilling -- would be the scenario where Iran declares an oil embargo a la OPEC in 1973, which Browder thinks could cause oil to double to $131 a barrel. Other outcomes include an embargo by Venezuelan strongman Hugo Chavez ($111 a barrel), civil war in Nigeria ($98 a barrel), unrest and violence in Algeria ($79 a barrel) and major attacks on infrastructure by the insurgency in Iraq ($88 a barrel).

...Although there are long-term answers like ethanol, what's needed is a crash conservation effort in the United States. This doesn't have to be command-and-control style. Moral suasion counts for a lot, and if the president suggested staying home with family every other Sunday or otherwise cutting back on unnecessary drives, he could please the family values crowd while also changing the psychology of the oil market by showing that the U.S. government is serious about easing any potential bottlenecks...

It's been done it before. For all the cracks about Jimmy Carter in a cardigan and his malaise speech, America did reduce its use of oil following the price shocks of the 1970s, and laid the groundwork for low energy prices in the 1980s and 1990s. But it would require spending political capital, and offending traditional White House allies, and that's something this president doesn't seem to want to do.

India Tells U.S. "Oh, No You Didn't!"

I couldn't help myself regarding the post title. It came to me in the shower and I went with it.

The United States is really showing how little power and influence we have in the world, when we have to resort to bullying tactics like this to get our way. I wonder what we did to scrape together our Coalition of the Willing to start the war in Iraq.

I'll be keeping tabs on this issue in the future as I'm more than curious to see how it plays out...----------------------A landmark nuclear deal between India and the United States will "die" in Washington if New Delhi supports Iran at the upcoming meeting of the U.N. atomic watchdog agency, the U.S. ambassador said Wednesday.

A week before the International Atomic Energy Agency meets to discuss Iran's nuclear program, U.S. Ambassador David Mulford said that if India does not vote to refer Tehran to the U.N. Security Council, it would be "devastating" to the deal currently before the U.S. Congress.

After Mulford's comments, India reiterated that the two issues should remain separate.

"We categorically reject any attempt to link (Iran) to the proposed Indo-U.S. agreement on civil nuclear energy cooperation, which stands on its own merits," Indian Foreign Ministry spokesman Navtej Sarna said in a statement.

"The position that India will take on this issue at the IAEA will be based on India's own independent judgment."

The separation is necessary because the United States has only agreed to recognize India as having a civilian nuclear program - not as a legitimate nuclear weapons state.

The deal was signed in July when Indian Prime Minister Manmohan Singh visited Washington, and marked a major policy shift for the United States, which imposed sanctions on India in 1998 after it conducted nuclear tests. The restrictions have been lifted.

IAEA referral of Iran to the Security Council could lead to economic and political sanctions against Tehran, which the United States and European powers fear could use its nuclear program to develop weapons. Tehran insists its program is for generating electricity.

Tuesday, January 24, 2006

Instability in Nigeria = Higher Oil Prices

So I finally got around to reading Osama Bin Laden's transcripts that he's put out over the years and I've come to two conclusions: 1) he's hella pissed and 2) he has more than a few valid criticisms of the United States. One of them being that the U.S. is continually guilty of raping other countries of their natural resource wealth and causing/supporting instability and suffering for the people in these countries. Well Bin Laden's not the only one who's fed up, many people are mad at the US and our corporations, and they're resisting our influence and fighting injustices with everything in their power. Enter Nigeria...where the United States is expected to get 25% of its oil in the future.

If I learned anything from actually listening to what Bin Laden had to say instead of forming an opinion based on quantified in the national media, it was that the United States can't expect and maintain national security and dominance off the sweat and blood of other countries and expect that there will be no backlash and no repercussions. But back to peak oil...(or were we already there?). Nigeria is yet another example of how unstable oil markets are. A small disagreement between a village and Royal Dutch Shell over an oil spill has significantly contributed to the rise in world oil prices. Imagine what a would a major event would do to world oil markets...

------------------The dispute grew out of a disagreement over which contractor should clean up the oil spill. In the wake of the accident, the village council appointed a contractor to do the job. Shell appointed another, and when he arrived, villagers chased him away.

The reason: The village-appointed firm had agreed to do such things as fixing the village's defunct water wells and providing plastic chairs for residents sit on. Then, villagers say, the Shell-appointed man came late one night with a bevy of drunken soldiers - and Shell's approval - and ransacked the village, leaving one teenager hospitalized and four houses and two cars destroyed. Shell, in a statement, denies inviting "any security agents into the community" and says the villagers have impeded cleanup....

Four international oil workers were taken hostage by armed men in speedboat last week... On Monday, one of the four hostages read a list of the captors' demands, including local control of oil wealth, a $1.5 billion payment by Shell to compensate for pollution, and the release from jail of an oil-region militia leader.

"Is this road fitting for an oil-producing community?" asks indignant village chairman Mr. Oweh, pointing to the bumpy dirt track that is his village's main street.

------------------------"The loss of more Nigerian oil could send the price to $80 or $95 per barrel or higher," says David Goldwyn, a former US assistant energy secretary who now consults in the region.

Nigeria's production has dropped by nearly 10 percent. Given the instability here, he says, "The likelihood of a significant disruption" to Nigeria's output of about 2.6 million barrels per day "always has to be counted as relatively high."

Already, two attacks in recent days on some of Shell's roughly 1,000 oil wells and 80 pumping stations caused a drop of 220,000 barrels a day in output - nearly 10 percent of Nigeria's 2.5 million barrels a day in exports.

Sunday, January 22, 2006

Those "Wackos" in Venezuela

The Government of Venezuela announced a statewide heating oil assistance program in Massachusetts on Nov. 22, and a similar program in The Bronx borough of New York on Dec. 6, 2005. Discussions for further expansion of the program are underway in several other states, including Delaware, Vermont, Connecticut and Pennsylvania.

“It is imperative we act to ensure our citizens are safe and warm this winter. The cost of heating oil has risen dramatically and the federal government has failed to provide the resources needed to help Maine citizens. We are grateful to CITGO and the Venezuelan government for their generosity,” said Governor of Maine, John Baldacci.

Baldacci said the deal was not about politics: "We have over 24,000 low-income seniors who are making less than $12,000 a year and they really need this assistance."

He added that Citgo was the only major oil company to respond to an appeal by 12 U.S. senators for assistance this winter. "It's a year when big oil companies have record profits. We encourage other companies also to come forward."

----------------

The Stats:

8 million gallons of heating oil at a 40% discount converted into additional funds for Maine’s 48,000 Low Income Home Energy Assistance Program recipients.

900,000 gallons of heating oil at a 40% discount to Native American tribes

120 thousand gallons donated to homeless shelters and other institutions

Maine' estimate of CITGO’s total donation will be approximately 5.5 million dollars.

------------

“Some have tried to read politics into these outreach programs”, said Venezuelan Ambassador Bernardo Alvarez. “This program has a human face. Venezuelan President Hugo Chavez made a promise in New York City following hurricanes Katrina and Rita and this Maine heating oil program represents the goodwill between the people of Venezuela and the United States. Help for those who need it most is a cornerstone of the new Venezuelan economy under President Chavez, and this program, following similar ones in Massachusetts and the Bronx, is part of a new effort to increase regional integration. ”

“CITGO is pleased to be part of another assistance program for those in need,” said Felix Rodriguez, CITGO’s CEO. “CITGO has over 160 gas stations in Maine, and we are proud to be responsible corporate citizens in the communities in which we operate, especially when the need is great. This is not about politics, this is not about oil. This is about life, about improving the lives of poor people. This is about people helping people.”

I'm more than a little concerned, if this how the discussion is going to go, when it comes to America's (and the world for that matter) future energy economy. The United States seems to turn everything into a good vs. evil issue, where we're the good guys of course and everyone else who doesn't agree with us or who don't want to put our national security and economic interests before their own are "obviously" against us.

The problem with this good vs. evil mentality (that has been perpetuation by President Bush and his alleged war on terrorism) is that it is extremely simple and presents a one-sided approach of dealing with some seriously complex issues in the world. We have used and abused other countries and their resources around the world, all in the name of globalism and maintaining US economic growth and now that some countries are starting to question the status quo, the most intelligent criticism Mr. McCain can come up with is that Hugo Chavez is a "wacko."

I believe that more countries in the world are catching on to the fact that the dominance of the United States in the world is on the downward slope and that our only way of getting our way is name calling and demonizing leaders in other countries and bullying and justifying military action against countries that can't defend themselves.

While Mr. McCain is making a valid point, that the US is vulnerable to political and economic instability in the rest of the world, he's taking a back door approach. Instead of having an honest conversation about limited energy supplies and how vulnerable we really are and all of the options that are available to decreasing our reliance on foreign oil supplies, he's calling people wackos. I know McCain is a presidential hopeful in the the next election, but I'm hoping the American people would have enough sense to not elect someone who resorts to name calling in the face of serious and complex issues.

Monday, January 16, 2006

India & China: Grave Threat or Leaders of Sustainability?

One of the areas of peak oil thats often purposely understated, is that of population overshoot. It's not brought up that often, because it reeks of "doomsdayer" and although the idea of population overshoot is both logical and likely, I sincerely believe that there's only so much reality people can take at one time, so I'll tread lightly and reserve the red pill for a later date. Cheap and plentiful oil has allowed for and encouraged the world population to grow from 2 billion to 6 billion over the pass century. Factory farming supported by petroleum based pesticides and fertilizers, cheap transportation fuel that made previously unhaitable locations habitable and allow areas with little natural resource endowments to be supported by other locations. The question becomes can the planet support the current population level once oil supplies because scarce in the future? Or will some sort of population retraction be necessary? Mull it over while reading the excerpts and related articles below that ask can the planet sustain growing populations in India and China. The scarier question to ask is can we support the population we already have...

-------------

Energy guzzlers China and India are often blamed for some of the world’s environmental problems, but a new study says the two most populous nations may set the stage for a clean and green earth.

The two countries are mastering energy-efficient technologies, implementing cheap and environmentally responsible transportation systems, and adopting new water harvesting techniques as models for a sustainable economy, says the annual report of the US-based Worldwatch Institute.

“We were encouraged to find that a growing number of opinion leaders in China and India now recognize that the resource-intensive model for economic growth can’t work in the 21st century..."

"Though [China] doesn't admit it yet, the US model won't work for China. And if it does not work for China, it will not work for India..."

China’s solar industry, the world leader, already provides water heating for 35 million buildings, and India’s pioneering use of rainwater harvesting brings clean water to tens of thousands of homes, according to the report...

The world’s most populated nation has successfully pioneered the use of small wind turbines, hydrogenerators and biogas plants for power generation in remote rural areas. China is the world leader not only in solar hot water technology but in producing superefficient fluorescent light bulbs.It aims to roll out a bus system that combines the speed of a subway with the affordability of a bus. Trials have been held and bus use has jumped fivefold during rush hour, the report says. Electric bicycles are also becoming popular, with domestic sales having reportedly trebled the projected sales of cars....

India, which has a tradition of promoting renewable energy, has built the world’s fourth-largest wind power industry. It wants to increase renewable energy’s share of its power from 5 percent to 25 percent.

--------

"Both nations are signatories of the Kyoto Protocol, but as developing nations they are exempted from cutting their emissions. However, China has already taken voluntary measures which have had a very positive impact," Verholme said.

Referring to last year's gathering on global warming in Canada, Verholme said: "What we saw in Montreal now was that while China came forward with measures it has taken to improve environmental sustainability, the US did not."

------------

Some critics might find the worries of these US environmentalists hypocritical, since the US is still the greatest burner of oil, using 25 percent of global annual supplies and producing 25 percent of carbon emissions.

The US also has the largest ecological footprint. The average US citizen requires about 9.7 hectares to provide consumable resources and space for waste, an amount that is 205 percent of what the country can provide within its borders.

That figure is only 1.6 hectares for the average Chinese person, or 201 per cent of the country's capacity, and 0.8 hectares for the average Indian, or 210 per cent of the country's capacity.

Saturday, January 14, 2006

Do You Think It's Time To Get Tougher With Iran?

MSNBC asked the above question today, and I found it infuriating. It's symptomatic of the way the media doesn't give the American people enough information to objectively evaluate world affairs and poses sensationalizing questions like this one to polarize people on opposite ends of the spectrum instead of taking an honest look at issues. Here's my feedback that I provided to MSNBC:

I think that the media is leading the American people down the wrong path, in the same way they did with the lead up to the war in Iraq, by automatically siding with the Bush administration to demonize Iran. The media is not questioning what rights the U.S. has to dictate whether Iran can generate nuclear energy for civilian use. The media fails to inform the viewing audience up the tenets of the Nuclear Proliferation Treaty, especially the following tenet: "The right to peacefully use nuclear technology." The media should focus on what evidence the IEA or the US has that Iran is developing nuclear weapons. The media should focus on the issues surrounding Iran's 20 year plan for energy security and not to be dependent on a dwindling fossil fuel supply in the world. The media should focus on other countries who have the rights to nuclear technology, use it for civilian use, and their plans to get off fossil fuels in the future (i.e. France, Germany, etc.). France derives approximately 70% of its energy from nuclear technology and a recent news article stated that no French train shall use fossil fuels by 2026.

The media should stop framing the debate as to what the US should do about Iran and referring to the issue as Iran's nuclear program or Iran defends Nukes program, alluding to the fact that it’s common knowledge that Iran wants to use this program to develop nuclear weapons. It's irresponsible reporting and if it continues, there should be no question in the future as to why US citizens believe that Iran is evil, it’s only agenda is nuclear weapons, and military action or extensive UN sanctions are justified. Give the people the full story instead of effort at sensationalism.

Thursday, January 12, 2006

Those Crazy Iranians & Their Nukes

“If the world arrogant powers and their allies create obstacles for the nation to access advanced technology, they will regret it. We cannot ignore our legitimate rights.“ ~Akbar Hashemi Rafsanjani

“In this age of democracy, the legitimate right of a country that wishes to utilize modern technology is being violated,“ he said.

“This onslaught has its roots in the imperialist nature of the West, which plans to keep other countries backward. The western philosophy is that the country, which stands on its own feet, finds access to advanced technology and overcomes ignorance, must be punished,“ he said. (Source)

The evening news tonight was horribly reminiscent of the media reports leading up to the war on Iraq. Iran resumed it's nuclear research this week and the United States and other members of the international community are seemingly frantic and just about ready to pull their hair out. They accuse Iran of violating the Nuclear Proliferation Treaty which has three pillars:

1) Non proliferation - The U.S., China, Russia, France, and the UK areconsidered Nuclear Weapon States (NWS) and they can own nuclear weaponsbut they agree not to transfer nuclear weapons technology to other states,and the non-NWS state parties agree not to seek to develop nuclear weapons.

2) Disarmament - NWS parties pursue to reduce and liquidate their stockpiles; Article X states that any state can withdraw from the treaty if they feel that "extraordinary events", for example a perceived threat, force them to do so.

3) Right to peacefully use nuclear technology

Iran is asserting the third pillar, as leaders say they want to do nuclear research for civilian energy purposes. Iran wants to kick the oil habit and although it receives lots of revenue from oil sales, it's refineries are crap and outdated, so it imports a large % of it's gasoline from other countries. I believe Iran is more aware of the looming energy crisis than most parts of the world and they are trying to work towards a decreased reliance on oil in general, as the country's future depends on finding a new energy source.

The U.S position is "we don't trust 'em." I think we should have well learned our lesson with Iraq, that you can't just go around starting wars with every country in the world you don't trust but when you've got the lone ranger for a president, you never know what he'll do next. The problem is , we're stretched thin in Iraq...unless Bush wants to reinstate the draft right quick, and bankrupt our country a little more, we can't afford to send more troops into Iran right now. Thank God. 2nd option is diplomacy...you know, that thing we forgot to give a sincere chance, regarding Iraq. The irony is staggering, as folks are starting to realize that the United Nations implementing economic sanctions on Iran and cutting off their oil exports would only backfire and hurt US consumers as Iran's pumps out a little over $2M barrells of oil a day (about 5% fo the world's oil production). Sanctions on Iran mean higher oil and gas prices at the pump. Are they really that evil that Americans are willing to hurt a little more in their pocketbooks? I'll stay tuned to the news to figure out what other responses (i.e. punishment) the world has in store for Iran.

Does Iran have the right to develop peaceful nuclear technologies to provide a secure energy structure for its people? Yes. France is doing it (No French Train Will Use Fossil Fuels by 2025). The Unites States (when we finally wake up) will do it. Why can't Iran? Does the United States or the UN council have any right to impose punishment/penalties against a country just because we don't trust 'em? No. Must I revisit the "imminent threat" campaign and assurance by the Bush Administration (Bush, Condi, Powell, Cheney...) that Sadaam had weapons of mass destruction? I'm preparing for a similar campaign against Iran, regardless of whether Iran's intentions are genuinely to generate civilian energy or not.

I can't help pulling for Iran on this one. If they are developing nuclear weapons, the UN should step in, if nobody can prove that they are, then the international community should back off. Nobody seems to be saying anything regarding the United States refusal to adhere to the second pillar and reduce its nuclear stockpiles. I personally think the United States and it's nuclear weapons combined with the direction our foreign policy has recently taken...poses a far greater threat in the world, than Iran right now.

Solary Energy Momentum in California

SAN FRANCISCO - Hoping to make California a world leader in solar power, state energy regulators Thursday approved some $3 billion in customer rebates over the next decade to encourage people to install solar panels on their roofs.

The goal of the project is to get Californians to install equipment capable of producing 3,000 megawatts of solar electricity on 1 million homes, businesses and public buildings over the next 10 years.

The state Public Utility Commission voted 3-1 to provide $2.9 billion in rebates for solar panels between 2007 and 2016. Last month, the five-member PUC approved $300 million in rebates for 2006.

Solar advocates said the $3.2 billion program would make solar energy more affordable, create jobs, reduce air pollution and cut emissions of heat-trapping gases blamed for global warming. (Full Article)

It's time's like these that I'm proud to be a Californian. So I know I just moved here a little over year ago, but I claim this beautiful state as my own. In order to mitigate our coming energy crisis, all levels of the government and local communities need to start investing in renewable energy and that includes solar energy. There's two basic ways to decrease our energy consumption. Penalties and incentives. There needs to be incentives for people to decrease their consumption and $ 3 billion over the next 10 years in California is a step in the direction...definitely not enough as a standalone move, but the ground work is definitely being laid down for other states to follow and othe incentives to be implemented.

Sunday, January 08, 2006

Russia vs. Ukraine: Lessons Learned

At the beginning of the year, Russia announced that it was cutting off natural gas supplies to it’s neighbor, Ukraine, as Ukraine refused to submit to demands to go from paying $50 to paying $230 (approx. market rate) per 1000 cubic centimeter of natural gas. As always, there’s two sides to the story, and Russia reportedly believed that Ukraine deliberately stopped negotiations in order to make Russia look like an enemy, and Ukraine believed cutting supplies were payback for the country’s ties to the West and increasing independence from Russia.

Europe proved to be vulnerable, as European countries relied on Russia for up to 30% to 100% of their gas supplies. Although Russia claimed that supplies to Europe would remain uninterrupted, European countries reported that gas received was not at normal levels. The United States expressed concerned of course and chided Russia for their actions, noting that other transitions were available to get Ukraine to pay market rates rather than increasing natural gas prices 4X the old price in the 3 month period. In the end, the embargo ended after a few days under a new deal, Russia will sell natural gas to an intermediary company at $230 per 1,000 cubic meters, while Ukraine will buy gas from that company as it comes into the country for $95.

So why does any of this matter? I think the Ukraine/Russia situation shows how vulnerable any country is to political instability and supply disruptions in other countries. It shows the immediate importance of not only diversifying our energy mix but also shifting over to a new energy economy completely before we caught up in a global war for quickly depleting natural resources. Most of the time Americans like to think of themselves as an island but the realities of global economic and energy interdependence are right there in front of us. Iraqi’s are feeling the effects of oil field bombings and attacks within their own country. In 1973, the US felt the effects of the OPEC Oil Embargo, and all Americans were witnesses to the havoc Hurricane Katrina causes on retail gas prices.

We’re vulnerable and we’ll remain vulnerable in the future to natural disasters and political instability in the Middle East, especially Saudi Arabia. 60% of the remaining recoverable oil reserves reside in the Persian Gulf and if political instability broke out in Saudi Arabia or other OPEC oil countries, dramatic price increases and swings would occur. Supply disruptions might also occur out of necessity. There are many concerns about the United States large reliance on our good neighbor, Canada, for our natural gas supplies. Guess what? Canada won’t be able to satisfy the United States unmitigated demand for natural gas resources in the future, due to capacity reasons, but also for the simple fact that they’ll need the gas to support their own economy and citizens. They’ll also need it to mine their unconventional oil reserves (i.e tar sands) and at some point, won’t be able to put the needs of the Unites States before their own. I expect the same situation to happen in other countries, where the United States imports petroleum resources.

So while the lesson learned from the Ukraine/Russia dispute might be Europe needs to diversify it’s energy resources, while diversification is good, it still won’t fully mitigate severe supply disruptions that are likely to occur in the future. It’s no wonder that the United States goes to such lengths, such as creating a war with Iraq based on misinformation, to be able to police areas of the Middle East, secure energy supplies and keep the oil flowing to benefit US interests.

Friday, January 06, 2006

New Idea: Mobile Air Rotors Use Wind to Generate Electricity

Large MARS units may be deployed to supplement established grid systems supporting the electrical requirements of large urban areas.This tethered device generates electrical energy as it rotates about a horizontal axis in response to wind. As a closed structure, the lighter-than-air Magenn Power Air Rotor System (MARS) lets the company produce wind rotors that are operable between 1 meter/sec and in excess of 28 meters/sec. The electrical energy is transferred down the tether to a transformer at a ground station and then transferred to the electricity power grid. Helium sustains the Air Rotor, which ascends to an altitude for best winds; and its rotation causes the Magnus effect, providing additional lift, stabilization, and causing it to pull up overhead rather than drift downwind on its tether. The distinct advantages of the Magenn Air Rotor System design are as follows:

* Magenn Air Rotor System is less expensive per unit of actual electrical energy output than competing wind power systems.

* Magenn Power Air Rotor System will deliver time-averaged output much closer to its rated capacity than the capacity factor typical with conventional designs. Magenn efficiency will be 40 to 50 percent. This is hugely important, since doubling capacity factor cuts the cost of each delivered watt by half.

* Wind farms can be placed closer to demand centers, reducing transmission line costs and transmission line loses.

* Conventional wind generators are only operable in wind speeds between 3 meters/sec and 28 meters/sec. Magenn Air Rotors are operable between 1 meter/sec and in excess of 28 meters/sec.

* Magenn Air Rotors can be raised to higher altitudes, thus capitalizing on higher winds aloft. Altitudes from 400-ft to 1,000-ft above ground level are possible, without having to build an expensive tower, or use a crane to perform maintenance.

* Magenn Air Rotors are mobile and can be easily moved to different locations to correspond to changing wind patterns. Mobility is also useful in emergency deployment and disaster relief situations.

These points are mutually inclusive. The advantages above combine to make Magenn the most cost-effective wind electrical generation system.

Wednesday, January 04, 2006

Global Warming Exposes Arctic to Oil and Gas Drilling

Wow. I couldn't believe this report when I read it. Coastal communities will be devastated and vegetation will be destroyed and we're writing reports focused on the next place to drill for oil, so we can continue to release more carbon dioxide into the atmosphere. You know...a crack addict can be sitting in his front yard, butt naked watching his house burn down and the only on thing on his mind is getting his next fix. That's how addicted to oil we are.----------------Rising global temperatures will melt areas of the Arctic this century, making them more accessible for oil and natural gas drilling, a report prepared by the United States and seven other nations said on Monday. It predicts that over the next 100 years, global warming could increase Arctic annual average temperatures 5 to 9 degrees Fahrenheit over land and by up to 13 degrees over water. Warmer temperatures could raise global sea levels by as much as 3 feet. Such a change would threaten coastal cities, change growing patterns for vegetation and destroy habitats for some wildlife, but an energy-starved world would have new areas for oil and gas exploration, according to the Arctic Climate Impact Assessment report.

The Arctic region, particularly offshore, has huge oil and gas reserves, mostly in Russia, Canada, Alaska, Greenland and Norway, Reuters reported. Warmer temperatures would make it easier to drill and ship oil from the Arctic, the report said. It did not attempt to quantify the costs of drilling and shipping Arctic oil and gas, or estimate how high energy prices would have to be to justify drilling in the region, Reuters reported.

"Offshore oil exploration and production are likely to benefit from less extensive and thinner sea ice, although equipment will have to be designed to withstand increased wave forces and icemovement," the report said.

However, land access to energy reserves would likely be restricted due to a shorter season during which the ground is frozen hard enough to support heavy drilling equipment. "The thawing of permafrost, on which buildings, pipelines, airfields and coastal installations supporting oil and gas development are located, is very likely to adversely affect these structures and increase the cost of maintaining them," the report said. Energy companies would find it easier to transport oil and gas because the warmer temperatures would open sea routes.

"By the end of this century, the length of the navigation season...along the Northern Sea route is projected to increase to about 120 days from the current 20-30 days," the report said.

However, a longer shipping season will increase the risk of oil spills, the report warned. The report was commissioned by the United States, Canada, Russia, Denmark, Iceland, Sweden, Norway and Finland. It concluded that global warming is heating the Arctic almost twice as quickly as the rest of the planet in a thaw that threatens millions of livelihoods.

Stocking Oil Piles Makes No Sense

Interesting...

The rise in fuel prices that followed Hurricanes Katrina and Rita has prompted many members of Congress to call for new and expanded federal reserves of crude oil, diesel fuel, home heating oil, jet fuel and propane. Proponents of stockpiling claim that if the government were to hoard those commodities when prices were low, it could unleash them on the market when supplies are tight, thus dampening price increases and stabilizing the market.

But the experience in this country with the strategic petroleum reserve strongly suggests that such government-managed stockpiles are a waste of taxpayers' money. The reserve should be emptied and closed. Public stockpiles are far more expensive to maintain than many analysts realize. For example, after adjusting for inflation, the petroleum reserve has cost federal taxpayers as much as $51 billion since it was created in 1975. If you divide that sum by the amount of oil in the reserve, that's $80 per barrel by the end of 2003.

Of course, even at that price, some would argue that the reserve is still worthwhile under certain circumstances. That's because many economists maintain that it's not the cost of oil that harms the economy during a price spike, but the microeconomic uncertainty caused by supply disruptions, the costs of adjusting to high prices and the political reaction to soaring energy prices. If large volumes of federal oil were released at the early stage of a supply shock, it could temper those effects.

But the government has never employed the reserve in this manner and probably never will. Politicians are loath to risk a premature release of public crude because one can never know how long a supply disruption might last, how high prices might climb or whether additional disruptions are on the horizon. In its 30-year history, the 700-million-barrel reserve, which was recently authorized by Congress to expand to 1 billion barrels, has been tapped only three major times: 21 million barrels were released at the onset of the Persian Gulf war in the early 1990s, 30 million barrels in September 2000 and 24 million barrels last year after Hurricane Katrina struck. Those releases were so small considering the size of the reserve that one wonders why politicians are so dead set on having a billion barrels.

Another reason for the reluctance to tap the reserve is the widespread belief that it should be maintained as a hedge against an embargo like the one America experienced in 1973. But embargoes are not the powerful "oil weapon" that people think they are. Once a producer sells its oil on the world market, that oil can be bought, sold and rerouted repeatedly. The producer cannot control its ultimate destination. The globalization of oil markets ensures that the United States will always have access to Persian Gulf oil whether OPEC members like it or not.

But what if, instead of an embargo, there was a catastrophic disruption in supply, say the kind that might occur were Al Qaeda to seize power in Saudi Arabia? That scenario is worrisome, but no stockpile would ever be large enough to deal with such a huge disruption. For instance, even if all of the oil in the reserve were released in 2004, it would have amounted to only 2.6 percent of the world supply - nowhere near enough to replace the oil from a major producer on a sustained basis.

Fortunately, it is highly unlikely that political motivations would lead an oil producing state to cut its production so drastically. Those nations need oil money as much or more than oil-consuming nations need the oil. Even anti-American regimes like Iran's and Venezuela's have no interest in economic suicide by suspending oil production...

Tuesday, January 03, 2006

Oil Reserves Part II: Unconventional Oil Reserves

So I came across Bill Kovarik's website the other day claiming that the media and other analysts were focused too much on relying on statistics that use proven oil reserve figures and how using these figures is myopic, wrong, and even dangerous. Here are a few quotes from the site:

"Unconventional resources, such as extra heavy oils, tar sands, gas in tight sands, and coal bed methane are not considered [in the USGS 2000 assessment] but they must, nonetheless, be recognized as being present in very large quantities.... The two major sources of unconventional oil ... are the extra heavy oil in the Orinoco province of Venezuela and the ... tar sands in the Western Canada Basin. Taken together, these resource occurrences, in the Western Hemisphere, are approximately equal to the Identified Reserves of conventional crude oil accredited to the Middle East."

"To these estimated quantities of conventional oil must also be added the potential for oil resources from unconventional habitats. These are geographically extensive and include the tar sands of the Province of Alberta in Canada, the heavy oil belt of the Orinoco region of Venezuela and the oil shales of the United States, Brazil, India and Malagasy etc. High production costs and low oil prices have hitherto inhibited the inclusion of unconventional oil resources in the world oil resource figures. Now, developing production technologies, coupled with the very much higher market value of oil, convert large quantites of unconventional oil into an effective resource. The volume of this addition to the ultimate oil resource base is a minium of two trillion (2 x 10 to the 12th) barrels (see WEC-CCR) and a maximum of unknown dimensions, given that, to date, there has been no formal search for unconventional oil and no systematic evaluation of its occurrence on a world wide basis."

------------What Is An Unconventional Oil Reserve?

"Unconventional" petroleum reserves include:

Heavy oils, which can be pumped and refined just like conventional petroleum except that they are thicker and have more sulfur and heavy metal contamination, necessitating more extensive refining. Venezuela's Orinoco heavy oil belt is the best known example of this kind of unconventional reserve. Estimated reserves: 1.2 trillion barrels.

Tar Sands, which can be recovered via surface mining or in-situ collection techniques. Again, this is more expensive than lifting conventional petroleum but not prohibitively so. Canada's Athabasca Tar Sands is the best known example of this kind of unconventional reserve. Estimated reserves: 1.8 trillion barrels.

I agree with Bill to the extent that in the future, the world will need to diversify its energy base, as our reliance on oil (actually fossil fuels in general) is unsustainable. That diversification will include a variety of the unconventional oil sources he mentions. But I think Bill is missing the point. You can't just shrug off the fact that these unconventional sources can't be classified as "proven" by oil companies and world governments. It is currently uneconomical/unprofitable to obtain oil from these sources and if investors don't see a return on their money, they're not going to invest. The most profitable oil is sweet crude because it's easy to get, the refining capacity to convert sweet crude to gasoline exists, and everybody in the world wants it. Where's the majority of the remaining sweet crude? The Middle East. If you're reading this Bill, it's dangerous NOT to heavily factor in the Middle East when describing the world's remaining oil supplies.

The other point Bill seems to be missing is that Peak Oil is not about running out of oil. It's about running out of cheap oil. Yes, the supplies of uncoventional oil reserves might be plentiful but think about it...if developing these sources is uneconomical right now, the only way these reserves can be developed if oil prices rise considerably and it becomes worth Exxon's time (for example) to mine for the oil. But if oil prices rise that high, what average consumer in the world is going be able to afford the gas/energy/petroleum byproducts produced from this process? What will the high prices do to the US and global economy?

The other point Bill missed (It's obvious that I think Bill has missed the bigger piture here) is that current infrastructure in place to mine these unconventional oil reserves is dependendent on guess what? Oil and natural gas. Miners need equipment that guzzle gasoline, which will be more expensive in the future.

Refining facilities need fossil fuels to remove sulfur and other contaminents. A large amount of natural gas (which is also in limited supply) generated heat is required to process tar sands:

The tar-sands process also uses huge and growing amounts of natural gas -- at a time of soaring gas prices and when gas resources in the Western Canada Sedimentary Basin are starting to decline. So efforts to ramp up tar-sand operations is raising concerns that the natural gas from the MacKenzie Delta in the Arctic region, which is slated to come to U.S. markets, instead could end up being used for tar sands production.

Between 2 to 6 barrels of freshwater are used to process one barrel of oil from tar sands:

Environmentalists contend that tar sands processing requires anywhere from four to six barrels of water for every barrel of oil. But Annisley said Shell uses two barrels of fresh river water for every barrel of oil...There are no industry-wide figures for how much water the companies use, though Woynillowicz contends that at peak production, the sites will use 350 million cubic meters of water a year -- roughly the amount of water used by a city of 2 million.

And if you were wondering, yes we need freshwater and yes, it's also in limited supply. I won't even start on the environmental damage this process causes...

Ok, so I'm picking on Bill to make a point, so we all don't miss the big picture and allow ourselves to be misled by the media or political figures looking around the corner for the next re-election. Our society has grown from 2 billion to 6 billion (and counting) based on the foundation of cheap oil. The solution our oil shortage/energy crisis does not involve jumping on the next limited natural resource and using it to our heart's desire, until it inevitably runs out. There's no free ride.

Unconventional oil sources are just as problematic as other alternative energy sources. New alternative energy require decades of investment and even then, alternatives will not be enough to satisfy the world's projected demand for energy. We're already behind in the game and we don't have decades. We have to immediately focus on long-term thinking and change our way of life and energy policy to become a more energy efficient society that values energy conservation, not mindless oil consumption. Anything less...would be uncivilized.

Peak Oil Related Articles Around The World

Oil Prices; No Relief in 2006

Despite expectations of tighter supply and high prices, experts say demand growth will remain resilient. Oil prices charged to a record in 2005 and could rise even higher in 2006 as the United States implements clean fuel rules and world energy demand remains strong, experts said on Friday. The outlook means more headaches for businesses already squeezed by soaring energy bills, and consumers who have been forced to pay up for gasoline and winter heating fuel.

“A lot of factors that existed in 2005 will continue in 2006. We expect to see demand stay relatively strong,“ Joanne Shore, analyst at the US Energy Information Administration, told Reuters. While some companies have beefed up their refineries in response to high fuel prices, the new capacity is not expected to match rising demand in the world’s largest oil consumer and will continue to support prices, analysts said. “There have been attempts this year to solve the bottleneck in the refinery part of the energy equation. That is still not resolved,“ said Jason Schenker, analyst at Wachovia Bank in Charlotte, North Carolina.

OPEC, which controls around 40 percent of world crude exports, pumped nearly full out this year to build stocks and help bring prices down from record peaks. But analysts say the group may trim output levels next year to prevent growing inventories from depressing prices, and some OPEC members have signaled they want to lower production limits at its January 31 meeting. “OPEC is going to have to go back to some supply management again if they are going to hold a (price) floor. It should be easy for them to manage, it’s not like they have to cut a lot they will still be at high output levels,“ PFC’s Jamal said.Full ArticleOil Demand Seen Surging in Coming Decades

THE HAGUE, Netherlands - Global energy needs will surge 50 percent by 2030 and prices will rise if capacity is not significantly increased, the International Energy Agency said Monday in its 2005 World Energy Outlook. There are sufficient oil and natural gas reserves to meet those needs, particularly in North Africa and the Middle East, but about $20.3 trillion in new investments is urgently needed to bring those supplies to the consumer market, the agency said.

BEIJING - China and the United States should increase co-operation on energy issues ranging from crude oil production overseas to civilian nuclear programs, China's top economic planning body said in a statement on its Web site. Co-operation should be deeper and more efficient, with priority placed on promoting stability in producing nations and secure oil shipping lanes, the National Development and Reform Commission said. The world economy would benefit if China has secure energy supplies, but U.S. concerns about the rise of China's fast-growing economy could lead to restrictive legislation, the commission added.

TEHRAN, Jan. 3--Chairman of State Expediency Council (SEC) Akbar Hashemi Rafsanjani said on Tuesday the energy supply and demand is presently balanced.Talking to Saudi Arabia’s ambassador in Tehran, Osama bin Ahmad Al-Sonosi, Rafsanjani said, “Any insecurity in the Persian Gulf region and even other regions of the world can upset this balance. This is not beneficial for anybody.“

Sunday, January 01, 2006

Oil Reserves Part I: Who Has Them and Who’s Lying?

One of the determining factors of when peak oil will occur is whether reported proved oil reserves are accurate or whether they’re overstated. The United States defines proven oil reserves as those than can be developed economically (meaning development yields a profit rather than a loss), but apart from the US and a few other countries, published reserves are not well defined and estimation methods are not readily apparent.

According to Colin Campbell, Kuwait added 50% to its proven oil reserve figure in 1985 to increase its OPEC quota, which was based partly on reserves while no corresponding new discoveries had been made and nothing in particular changed in the reservoir. In 1987, Venezuela doubled its reserves by the inclusion of large deposits of heavy oil that had been known for years. Both instances forced other OPEC countries to retaliate with huge increases in their reserves.

Increases in previously discovered reserves can occur over time due to advances in technology, but 30% - 60% increases shown in the picture above aren’t likely.

And even within the United States, companies are toeing the line when it comes to reporting their reserves. Shell caused quite the scandal in April 2004 when it downgraded approximately 22% of its proven oil reserves to less certain categories (possible or probable). An honest mistake you ask? Ummm…no. Shell management allegedly knew about overreporting as early as three years before they came clean with the general public.

Walter van de Vijver complained about the estimates after he took over as chief of the division in June 2001, replacing Sir Philip Watts, who had been promoted to Shell chairman…The report said van de Vijver notified Shell's managing directors in February 2002 that the company's reserve classification rules did not match those of the U.S. Securities and Exchange Commission and that Shell might have overestimated its reserves by 2.3 billion barrels.

"I am becoming sick and tired about lying about the extent of our reserves issues and the downward revisions that need to be done because of far too aggressive /optimistic bookings," van de Vijver wrote in a November 2003 e-mail to Watts, released in the summary.

Other correspondence showed executives knew estimates were wrong but did nothing, the investigators found. Instead, investigators found, executives attempted to "manage" the problem and "play for time" in hopes that future growth would eventually obviate the need to come clean. But "this strategy failed — as business conditions either deteriorated or failed to improve sufficiently to justify historic bookings."

Although investors seem to be confident in US company reserve figures, the SEC is still toying with the idea of issuing new reserve reporting guidance. So you start to wonder, if Shell is monitored by the SEC and fudges its reserves a bit, how much do you want to bet that the remaining big dogs in the oil industry (Chevron-Texaco, Conoco-Phillips, etc) aren’t being as forthright either? Better yet, what about other countries who’s business environment and accounting rules aren’t as stringently regulated?

Al-Husseini just retired as vice-president of oil exploration at the Saudi oil company Aramco and in 2004 he was skeptical about oil production expectations projected by the International Energy Agency (IEA).

The IEA predicts that demand of energy of all types will soar by 59 per cent by 2030... The IEA expects the Middle East Opec states to be pumping 52 million barrels a day by 2030, up from 20 million today. However, Sadad Husseini, a former vice-president in charge of production at Saudi Arabia’s state-owned Aramco oil group, told Channel 4 News that hopes of doubling Saudi production to 22 million barrels a day over two decades to help to meet demand were 'unrealistic' and a dangerous basis for policy."

"I think in total the [International Energy Agency] outlook is much too high for production and it’s unrealistic for the world to be expecting such high numbers from all of the producers, including Saudi Arabia. They’re not only overestimating the Middle East, but they overestimate non-Opec, they overestimate Russia, they overestimate the whole global resource base. And I think this is a rather dangerous situation for the US government policy to be based on."

"I suspect prices around $50 will be with us for a while," he says. And then he issues his own Saudi-related warning. "The excess capacity is no longer there. That will mean more of the volatility and price surges. And the financial markets have yet to wake up to that."

So according to Husseini, its an issue of both exaggerated reserve estimates and exaggerated reserve projections based on the fact we expect demand for oil supplies to go up, but not based in the reality that oil supplies may not be able to satisfy demand.